City are keen to sell the fullback and have been eager to set up a swap with Barca involving Nelson Semedo.
However, Mundo Deportivo says the two clubs are in disagreement over Cancelo's valuation. As such, negotiations have hit a brick wall.
For his part, City manager Pep Guardiola is keen to work with Semedo.
And there remains hope of a deal being found with both players represented by Portuguese agent Jorge Mendes.